Hess to close last refinery in New Jersey

posted at 5:01 pm on February 3, 2013 by Jazz Shaw

This story went mostly under the radar, but it will have some implications for many people on the east coast and for the industry in general further down the line. Without much fanfare, Hess recently announced that they were selling off their last commercial refinery, located in New Jersey. Their stated reasons are clear enough, but there’s a bit more to the story.

Hess Corp.’s Port Reading, N.J., refinery—the company’s first and last such facility—will close its doors at the end of next month as the company gets out of the refining business to focus on more-profitable exploration and production activity.

The company also said it is seeking to sell its U.S. terminal network. Chairman and Chief Executive John Hess said the moves “will complete (the company’s) transformation from an integrated oil-and-gas company to one that is predominantly an exploration-and-production company and be able to redeploy substantial additional capital to fund its future growth opportunities.”

Industry analysts agree that in the current market, the profitability of refineries has declined in comparison to exploration and recovery. This is in contrast to some reports – as recently as last October – which were projecting some light on the horizon for this aspect of the industry.

The refinery business has long been the difficult stepchild of the oil industry, expensive to run, prone to accidents and a low-margin headache for executives who preferred drilling for gushers.

But signs of the improving fortunes for the industry can be seen at Valero Energy’s Three Rivers refinery here, about 70 miles south of San Antonio at the doorstep of a giant new shale oil field.

Why the discrepancy, and why should we care? The first question deals with the above reference to shale oil and other new resources. There hasn’t been a new refinery built in the United States for more than 30 years, but a few of them have undergone massive upgrades to allow them to handle shale oil and the complex hybrids coming from bitumen exploration in Canada and some spots in the American west. It’s an expensive process, but when completed they are able to tap into a new breed of raw materials and come back to profitability. East coast refineries are too far away from those lines to make it productive to upgrade, so they’ve stuck with the business of processing sweet crude from the middle east. Unfortunately, that business is on the decline just as the newer resources mentioned above are ascendent.

Unfortunately for consumers in the Northeast in particular, this means supply lines for meeting their winter energy needs are extended and the prices go up. Gas in New York has already climbed back up above $3.50 per gallon and is projected to continue to rise through the spring.

So why haven’t more of the western refineries followed suit and upgraded? It’s an expensive process in the extreme and it requires the confidence that there will be enough supply to keep them operating at capacity well into the future before they make it.

At the BP refinery in Whiting, Ind., a major Midwest hub, BP is nearing completion of a $4 billion expansion project expected to be completed in 2013. That project includes a new coker, crude distillation unit, a gas oil hydrotreater, and modernization of its wastewater treatment and sulfur recovery facilities.

All those changes are needed in preparation for handling the new fuel hybrids. Now ask yourself one question. If you had to spend four billion dollars to upgrade one refinery, and there was continued talk in the media every day about extended delays – if not outright cancellation – of the Keystone XL pipeline, combined with new regulations by the hundreds which add expenses to even begin the process, would you spend it? Or would you keep that money on the sideline until there were either new policies in place or new policy makers which boosted your confidence that you would have enough crude coming in to keep your plant humming?

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Gas prices have gone up sharply in PA over the last week. Thanks a lot, Barky. As usual, it was all part of the plan. Election is over, anyone who has a job is wealthy, and Obamacare is the next step in the transformation to the USSA.

If the natives get restless, Barky will give them more free stuff to shut them up. Bread and circuses.

Elections have consequences. Add in the fact that RINO Christie is a warmist and this is not surprising. It does warm my heart that the northeast will have to pay more for energy. Being stupid should be painful.

Here’s the thing, too. Those refineries just don’t produce gasoline. They also produce heating oil, which is especially needed in New England. Those refineries switch off production of gas in order to concentrate on estimated needs for fuel oil, then, when they’ve reached tht mark, switch back to gasoline so as to have stocks on hand for the summer months. Rinse and repeat.

Heating oil up here in Maine, from my dealer, is currently $3.79/gallon, with the average home using around 150-200 gallons a month. There isn’t much in the way of natural gas available, and the only alternatives are electric or propane, or wood, and the ecotards are now screaming about all the folks who have converted to wood being polluters and how they should be required to have filter systems, etc, to ensure they only produce “clean air” out the chimneys. Morons.

I am replacing my older oil-fired forced hot air furnace with an electric one, as running the calculations show I’ll be saving at least 50% off what I’m currently paying for oil.

There is another big refinery just down the pike from Hess that’s still operating, the old Esso/Exxon refinery which has been there for more than 100 years. However, they have not been putting much money into it ever since it was bought out (the 4th or 5th time in last 15 years?) by Conoco-Phillips—now Phillips. People who work there say it’s being held together with bubble gum and bobby pins, and some fairly major repairs are not being done. It is one of the few refineries that can handle sour crude.

Jersey gas prices are low because our state tax on gas is low, not because of the proximity of the refineries. But the property owners in refinery towns have some of the lowest property taxes in the state.

See, it’s like this:
1. They have lots of highways that connect them to neighboring states.
2. Therefore, lots of out-of-state, and “close to the border” commuters.
3. People plan their gas purchases, when they can, to take place in NJ.

It is not only there. Tesoro is closing down their Honolulu refinery and Chevron is thinking about it also. The beginning of the deindustrialization of America that liberals have been striving for.

pat on February 3, 2013 at 5:49 PM

I have waited for, and asked for a cogent explanation of this, from the greenies (not that I count you as one; just that your comment twigged the thought, again;) how is it greener to move the unrefined product to a remote (and, ever-more-remote) location, then move the refined product to points of storage and purchase?

Holy smokes, what’s the cost of electricity in your neck of the woods? In mine, it’s almost $0.07/KWH and rising fast.

petefrt on February 3, 2013 at 6:18 PM

I’m paying around $80/month for electricity. That’s for all the lights, appliances, and hot water heater. The calculator(s) I was using indicate that the new electric furnace would add, during the winter months, around $200/250 month. That’s about half the cost of what I’m currently paying for fuel oil.

I already have all the ducting in place, so it’s a matter of upgrading from 100a service to 200a service, and then the purchase and installation of the furnace. The furnace itself will run around $800, and the others I’m still getting quotes on. I figure around $3K total, which is a bit up front, but not much more than I’d pay for fuel oil for one cold winter. After that, the savings start kicking in. :)

Governmental leadership is just stuck on stupid when it comes to refineries in this country. I guess that is the price we pay for not being a great country like China. Yes there is some sarcasm in my last statement.

For the record New Jersey one of two states that will not allow you to pump your own gas. Gas stations still have to pump the gas into your car. Another stupid law.

I am replacing my older oil-fired forced hot air furnace with an electric one, as running the calculations show I’ll be saving at least 50% off what I’m currently paying for oil.

TKindred on February 3, 2013 at 5:58 PM

Down here in rural eastern NY, it is just about even between heating oil and an electric heat pump with resistance heating supplement when the outdoor air is too cold for the heat pump to be adequate. HOWEVER, Andy Cuomo wants to shut down the Indian Point nuclear reactors that provide 25% of the electric power which means electricity will go up skyhigh. Of course if the Fed EPA bans fracking for oil and gas, oil will also go up. I went with oil for my new boiler but noone really knows what is the best way to go here. Poor government policy at all levels it seems.

People who work there say it’s being held together with bubble gum and bobby pins, and some fairly major repairs are not being done.

IrishEi on February 3, 2013 at 6:09 PM

It’s not just new construction that requires permits. Upgrades require permitting, too. Under the Dr. Chu regime, those have not been forthcoming either. That is the story of the whole Obama administration: slow-walking and studying and studying and studying every permit application.

And they wonder why investment money is sitting on the sidelines. Hah! Between the engineering and the equipment purchases you have a 2-year lead time. But without any assurance that the permits will be there, the companies aren’t going to take the chance.

massrighty, I know all about NJ gas $, stationed there back in the 90’s for a few years.

TKindred, have you looked into wood pellets? I made the switch several years ago and for the cost of 1 tank of fuel oil ($1,100.00 = 275 gal x $4.00 gal) I purchase 4 tons of pellets and heat my house all winter in NH and my house is 70 degrees.

TKindred, have you looked into wood pellets? I made the switch several years ago and for the cost of 1 tank of fuel oil ($1,100.00 = 275 gal x $4.00 gal) I purchase 4 tons of pellets and heat my house all winter in NH and my house is 70 degrees.

D-fusit on February 3, 2013 at 8:01 PM

I had looked into a pellet stove, but the overall cost is too high for me. To start with, I’d have to completely rebuild my back porch so as to be able to store the pellets. Not just strengthening, but a roof, walls, etc. I’m a disabled veteran with some mobility issues, so having the pellets easily accessible (plus protected from the weather) is something I’d need.

Add to that the cost of the pellet stove and it’s just more than I can do. Pellet stoves are an excellent idea, but unfortunately just not doable for me at this time.

I admit that my sympathy for the victims of Hurricane Sandy is mitigated somewhat by the fact that their local governments and utilities are responsible, and they keep voting the same maggots in. Similarly, when Blue controlled areas suffer the consequences of Leftist policies, I really cannot get too concerned. I know we are going to suffer too, but usually when thugs take over they try to give the advantage to their own side. I take some comfort the fact that the Leftists will be striking their own base.

So close the refineries. We cannot do anything about it, and it is not worth the fight because saving the production in Blue areas only helps those who attack us. If there are blackouts in New York City, it will match the ones that will come here. If Boston freezes, oh well. If Hawaii cannot keep the airliners fueled and is cut off from the tourist trade, offer an “I told you so.”. And since these are largely Blue urban areas, the supply chain disruptions will be more than passing entertaining. What happens when the EBT cards have nothing to buy?

There are those who are going to have the foresight to be prepared as best they can. That is the best that they can do, because they are not going to be able to stop what is to come.

Cool. The USSA will be buying all their gas from the New Confedreracy. That will be great for our balance of payments.

trigon on February 3, 2013 at 5:12 PM

You’d better have sufficient anti-armor and anti-air assets to protect them, or I guarantee you that advantage will not last.

But at the same time, the last time Confeds found out what happens when a rural-agrarian/cash-crop society goes to war overnight with a severe discrepancy in heavy industry. In short: if you don’t win very quickly you are in very deep doo-doo.

But at the same time, the last time Confeds found out what happens when a rural-agrarian/cash-crop society goes to war overnight with a severe discrepancy in heavy industry. In short: if you don’t win very quickly you are in very deep doo-doo.

MelonCollie on February 3, 2013 at 10:41 PM

Uh, if one takes all of the industry south of the Mason-Dixon line today versus what it was during the Civil War one would find that things have shifted somewhat………………………………

All those changes are needed in preparation for handling the new fuel hybrids. Now ask yourself one question. If you had to spend four billion dollars to upgrade one refinery, and there was continued talk in the media every day about extended delays – if not outright cancellation – of the Keystone XL pipeline, combined with new regulations by the hundreds which add expenses to even begin the process, would you spend it? Or would you keep that money on the sideline until there were either new policies in place or new policy makers which boosted your confidence that you would have enough crude coming in to keep your plant humming?

For someone who claims to know the industry you seem to have this backwards. Keystone, domestic natural gas, and flat demand for petroleum products have rendered Hess’s refineries uneconomic. I guess you are also blaming their closing of their Virgin Island complex on Keystone delay as well. Yes regulations have had an impact but a bigger impact because Hess’s refineries continue to violate them. Be straight with your readers Jazz …Good news for some parts of the energy sector in the US have negative consequences for other parts.

Can someone tell me how we got this thread got onto discussing the largest military bases in the United States? By the way Ft. Hood, TX is the largest is largest in terms of soldiers and the White Sands test area is the largest in the terms of mere size. Look it up.